Saturday, February 21, 2009

Dinner Table Economics and Deflation

I recently mentioned that I would post an article on deflation, as I have become concerned by the way that this is being used as an excuse to engage in printing money. The idea that deflation is bad seems to be widespread amongst economists, but I am not at all convinced of this. In order to understand why, I will need to take a slightly circuitous route, which is to discuss what wealth is and how it is created. After all, economics should be primarily about how we create (and distribute) wealth.

Happily for the purpose of writing this post, I had a couple of friends come to dinner recently, and our discussion turned to economics and wealth creation. I say 'happily', as one of the friends is very knowledgeable about economics, meaning that he knows the arguments of many mainstream economists. As we conducted our discussion, it struck me that there is a fundamental problem in such arguments. It is not something that they ever say directly, but an assumption that sits underneath many of their theories and thinking. They actually think that wealth has arisen as a result of macroeconomic tinkering by governments.

As such, I thought I would start this post with a key part of understanding deflation, which is to consider what wealth actually is and how it is created. I will use some rather odd illustrations that I used during the dinner so that, as I explain, at several points it might be useful to imagine you are at the dining table with us.

One of the points which was central to the discussion, is so obvious that it should not need to be said. However, it is a point which is often lost in all of the complexity of economic discussion. The point was this:

If an economy has a total output of 100 units, it does not matter what the number of money units there are in circulation, as this will have absolutely no bearing on the level of wealth in that economy. The economy could have one hundred units of money in circulation, a thousand units, or a million units. It will make not one jot of difference to the wealth of that economy. The output will still be 100, and that output represents wealth.

To explain the point I was making, I took two wine glasses on the table and said that yesterday I, as a unit of labour, produced two such wine glasses every day. These two glasses of output were sufficient for me to live a day to day subsistence lifestyle. I then added a wine glass, and explained that due to various improvements in my ability to make glasses, I was today making three glasses instead of the two yesterday. As such, I have an additional glass which means that I have increased my wealth creation such that I can use that one glass of output for discretionary spending.

Having added the additional wine glass to my output, I suddenly have some choices. I looked around the dinner table, and decided that I would utilise that additional wine glass as a means of exchange for one portion of dessert. I designated one of my friends at the table as a dessert manufacturer. I moved my additional wine glass over the table, and exchanged it for a portion of dessert. I am now one portion of dessert richer, and the dessert manufacturer has one wine glass.

The interesting part of our transaction, however, is not immediately visible in this example. When we increase the output of a good, more of that good is available in the market. Assuming that demand is not increasing through factors such as significant population growth, then the additional supply of glasses has some interesting effects.

Before my output of wine glasses increased, the cost of wine glasses was higher reflecting the greater input of my labour in each wine glass, and the dessert maker would therefore have to pay me one and a half portions of dessert in exchange for a wine glass. Under these circumstances, the dessert maker could not afford to buy the wine glass, and was forced to use a cheap pottery mug to drink his wine. As it is now, the number of wine glasses has increased in relation to demand, my input of labour per glass is lower, such that I am now willing to exchange my additional wine glass for just one portion of dessert. The result of this change in my wine glass output is therefore as follows:

I am one portion of dessert wealthier, and the person who makes the dessert is wealthier because he can now keep a half portion of dessert that he would previously need to have given me. We have both become wealthier. Even as the exchange value of the glasses has decreased, we have both become wealthier.

The curious point in this is that, if the wine glass production had not increased, then the dessert manufacturer would not have wanted to make the exchange at all. He felt that one and a half portions of dessert was too much of a price to pay for a wine glass. My increase in output not only allowed me to increase my wealth by one dessert, but also expanded the market for my output. This is why everyone is wealthier...

If we return to the earlier point about an economy having 100 units of output, in this case I have just increased the output by one. We have 101 units of output. The economy is more wealthy, and it has nothing to do with the number of units of currency in circulation.

Returning to my increase in output of glasses, there is no necessity for me to use this addition of one glass of output to consume a portion of dessert. I can use it for many purposes. Let's imagine that I am supporting a family, and I have ambitions for my children. I want them to go to university. In order for my children to go to university, I will need to save some money to pay for the fees. As such, I forgo the portion of dessert, and decide I will save the additional daily output of wineglasses. According to many economists today, this foregoing of consumption of dessert is a bad thing....the more we consume, the wealthier everyone becomes.

However, (wisely) ignoring these economists, I go ahead and decide that I will save the one wine glass of additional output to pay for my children to go to university. I look around, and conveniently decide that the other person at the dinner table happens to be a bank. I cancelled my deal with the dessert maker, returned his portion of dessert, and passed the wine glass to my friend who is now acting as a bank. Instead of the dessert manufacturer holding the glass, the bank now holds the glass.

Why did I not just keep hold of the additional glass? After all, over the years, I could store up lots of glasses and give them to the children when they reach university age, and they can then use those glasses to exchange for all the things they need. Why did I give it to the bank?

I gave it to the bank because the bank will invest it. In this case, the bank uses the value of the glass as a means to give another producer the ability to do something new, such as increase the sales of wine. At the time I am giving the glass to the bank, one glass of wine can be exchanged for one wine glass (obviously that is the quantity of wine - as you do not keep the wine glass). In order for me to give the glass to the wine seller (a wine bar owner), I ask that the wine seller gives me a tenth of a glass of wine every day for every glass that I provide. The wine seller gets more glasses in which to serve the wine, and I get wine in return. Meanwhile, as a price for putting me and the wine seller together, the bank charges a fee of one twentieth of a glass of wine per day, per wine glass invested. We all get wealthier.

In the case of the wine seller, with more wine glasses available, he can now serve more units of wine to more people and increase output, I am wealthier as I am getting lots of wine, and the banker is wealthier because they used their knowledge to put me and the wine seller together, and they get some wine too. Just as before, the economy has become wealthier. It has nothing to do with the number of units of currency. It has to do with my increased output of wine glasses.

Now at one point, my economically knowledgeable friend suggested that we needed inflation to make people invest money, and that it was necessary to increase the money supply as the economy grows. That was why I gave the example of why I would (without any inflation) still invest my money in the bank. I also explained inflation this way:

I went back to my original choice of using my original wine glass as an exchange for a dessert; exchanging a portion of dessert in exchange for a wine glass. Instead of consuming the dessert myself, however, imagine that I am going to give it as a birthday present. The birthday is not for 6 months, so I take the dessert home and put it in my freezer. Having put it in the freezer, I am rather surprised to find that, every day, a stranger comes into my house, opens the freezer, and takes a small piece of the dessert away with them. As such, every day the dessert gets a little smaller. This is inflation. The stored value of my labour, represented by the dessert, is reducing every day that goes by.

This is one of the keys to understanding the supply of money. Every time there is an increase in the money supply, it is the equivalent of taking a little part of the value of everything from people. Where does that value go. Who is the person who is coming in and taking away a small piece of my dessert every day?

In the case of money, this is the person who makes more units of the money. Whenever they do this, they take a little part of the value of money from the existing money. In the case of the dessert, it represents the stored value of my additional wine glass of production, which is equivalent to saving x units of money. I made an exchange for one unit of dessert, and wanted to give the person having the birthday the equivalent of one wine glass of my labour. However, in a situation of inflation, the same thing happens to money as happens to my portion of dessert. Someone comes and takes a bit of it away every day. Whilst we would not accept a person coming in to our house and taking a piece of our stored value from the dessert, we readily accept them doing the same thing with our money in the bank, or money in our wallets.

In this example there is an illustration of something about wealth and money. Wealth is based upon output, and the structure of the money supply has nothing to do with making wealth, but has something to do with the distribution of wealth. Inflation distributes wealth away from you to the printer of the money. The only way to become wealthier is to produce more 'stuff' and this can be achieved without any manipulation of the money supply. This then raises the question of why there is so much manipulation of the supply of money. Macroeconomics is full of lots of complex models of the supply of money.

For the answer to this, we will leave the dinner table economics behind and turn to Adam Smith, who (as ever) got the picture absolutely right. This is what he has to say about money:

'For in every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal [gold or silver], which had been originally contained in their coins [...] By means of those operations the princes and sovereign states which performed them were enabled, in appearance, to pay their debts and fulfil their engagements with a smaller quantity of silver than would otherwise been requisite.'

The cost of this he illustrates with an examination of landed estates, some of which which were awarded rent in money, and some which were awarded rents in corn. The estates with rent fixed in units of corn continued to be wealthy, but the estates with rent fixed in money became poor.

What Smith is explaining is that debasement of money serves only to help the state. Inflation of the money supply today is exactly the same in principle to what Smith was describing, and the same as someone coming in an taking a piece of my dessert.

In modern macroeconomics it appears that many economists are entirely confused about money. They seem to think that money has some mysterious purpose. If we go back to the dinner table economics, we did not need money to get wealthier, we just needed me to increase my daily output. Money has absolutely nothing to do with wealth. Money is, or should be, a unit of exchange that makes transactions more simple, and an abstraction of stored value that everybody accepts. It is the equivalent of the portion of dessert, or the wine glass - it is representation of these objects and the input of labour that created them.

The velocity of money, the number of units in circulation has nothing do with output whatsoever, it has to do with the way the wealth of output is distributed. I can not put this any more clearly than this:

Wealth is created by units of labour A, B and C producing and output of X, Y and Z.

The only difference that money makes in this equation is whether the money system offers incentives or disincentives to those units of labour to produce more or less output, and how the wealth is distributed. That is largely a factor of how much and in what way the value of their labour is expropriated through the scheming of 'princes and sovereign states'.

My knowledgeable friend was suggesting, and has argued that it is that monetary system that has allowed the growth in wealth in the Western world. My point is very clear; it is the increase in total output of labour that is the sole reason for the increase in wealth. All of the fiat money systems, and all of the rest of the apparatus of modern macroeconomics has done is play a part in how that wealth is distributed. From the dinner table economics, we can see that there is no need to create any incentives for people to get on with the useful business of increasing output and investing their increasing wealth to create even more output. The logic of these actions determines that this is what would, in any case, be what would happen.

Now if we return to the economy that has an output of 100 units, and imagine that today we have 100 units of money for that output, we can see where inflation fits in. If we then increase the money supply to 110 units, then we have inflation. The increase in the money supply has no bearing on the output, but simply means that there are more units of money relative to the output. The ten new units of money have been produced, and the value of the new units means that the producer of the new units of money have taken a portion of the value in exchange of the existing money. If you hold one of those units of money, you have just given something to the producer of the new money.

Lets imagine that the units of output also increases to 110, at the same time as the money supply increases to 110 units. Surely this is okay, as we can still buy the same number of units of output with our 1 unit of currency? This might seem reasonable, right up to the point where we start to think about where the increase in output has come from. If we think of the dinner table, it is me that has increased my output of wine glasses, so I have created the wealth. The printer of the new money has not increased output of anything, but they still have ten units more of money. This still means that my unit of money is worth less than it should be. If the additional units of money had not been created I would have been wealthier, but that additional wealth has been transferred to the producer of the new money.

But the producer of the new money has created no output....I have, and it is me that increased the output....but I see no benefits from it.

As an alternative, we can take another scenario, which is that output increases from 100 units to 11o units, but the units of money remain at 100. In this case, as my output increases, I become wealthier. My increase in output directly benefits me. I gain the full benefit of my output (the reality is however, that this is collective, not individual - everyone benefits). This is what many economists fear - deflation.

Economists say that deflation is a terrible thing. They say that it wrecks economies. If you have deflation, then people stop consuming, and stop investing.....

Let's start with the case of consumers stopping consuming. In this case, we have a good example of deflation to illustrate that deflation does not stop people buying things that they want. The example is computers which, as every year has gone by, have become ever cheaper in relation to their performance and sophistication. We all know that if we wait until next year, we will get a much better computer for our money. This is real deflation, but during a period of real deflation, the sales of computers has expanded, and expanded, and expanded.

If we think of a more mundane example, we might come up with something like a bottle of shampoo. Let's imagine that every year there are ongoing productivity gains in manufacturing shampoo such that the price falls by 3% per year. Does this mean that we will defer our buying of shampoo? Does that mean that, in order to benefit from the price reduction of shampoo, we will walk around with greasy hair.

Alternatively, we can take the case of a discretionary spend on something like a holiday. As some people will be aware, the low cost airlines have seen huge reductions in the cost of overseas travel, and the costs continued to go down over a period of years. Did this mean that people stopped overseas travel while they waited for the flight prices to drop even lower? What we actually saw in places like the UK was a massive expansion in overseas travel, as it became ever more affordable. However, this occurred despite deflating prices. This is like the example of the wine glasses....

The idea that people will not spend money during deflation is simply not true. However, if we knew that there was an unusual deflation about to take place, such that we expected the price of something to drop dramatically at some future point, we might defer our spending. For example, if the newspapers were to announce that in April of this year that there will be a new type of computer which will cost half the price of a computer today, then we would likely wait until April before buying a new computer. Moreover, when the new computers were released in April, then the sales of computers would increase as more people could afford them, and we would all potentially be richer by a factor of half a computer (if that makes sense).

However, such events would always be exceptions, and we readily buy computers despite the steady price deflation.

In short, steady deflation does not stop people from consuming.

This still leaves investment. In the case of investment, an argument might be put forward that, in the event of deflation, you could keep money under your mattress and still see it increase in value. As such, you have a disincentive to invest.

However, if we imagine that we have a situation of deflation, what has changed compared with inflation. In a period of inflation we have to invest our money just to stand still. However, we have many choices. We can put our money into a building society account and get a steady interest rate which will see a small return on our investment. Alternatively, we can put our money in a higher risk investment but risk our investment overall. In all cases we measure our return bearing in mind the rate of inflation. If we see inflation is at 3%, then we will want at least a 3% return, but most of us will want a return greater than inflation.

If we then imagine a deflation rate of 3%, that means that we will gain a 3% return on our money under the mattress. However, if someone offers us an additional 2% return over and above that 3%, we are very likely to be tempted into this. Just as in the case of the investment of the wine glass in the dinner table example, we will see that this can be a very smart thing to do with our savings. The only difference here is that it is not necessary to invest in order to keep your money, and this therefore becomes an issue of morality.

This is the morality argument; if we return to the dinner table economy, I have through my own ingenuity and efforts, ensured that I have achieved enough output to have an additional wine glass every day. This is the value of my own labour, not the labour of anyone else. The question here is, do I own the value of my own labour? What I do with the value of my labour should, as far as possible, be my own. If I choose to risk that value of labour by investing it should be my own decision. Whilst there are good arguments in favour of me making that investment, does that mean I should be compelled to invest it in order to preserve its value? If we think of the person coming into my house and taking away a piece of my dessert every day, such that I will not want to store the value of my labour in such a way, is that morally justified?

I will let you decide on the morality argument. However, what is certain is that there is no reason why deflation should lead to people not wanting to invest their money.

The final argument is that it makes the burden of debt greater. This one is a real puzzle to me. If you have a situation of inflation of 2 % and you want a 5% return, you will charge 7% to achieve this return. If you have deflation of 2%, then you will charge interest of 3%. In both cases the cost to the borrower remains the same. If you move from inflation into deflation, as would be the case now, then you have a problem in that the debt burden would increase. However, if you went from an inflation rate of 10% down to an inflation rate of 2% then the debt burden would also increase. In other words, the burden of debt is nothing to do with inflation of deflation, except for when there is a change.

What if there were a rate of deflation of 10%? The cost of borrowing would then have to go up dramatically for our example, with a 15% rate! However, if we had no increase in the money supply and the output of wealth from the economy was increasing by 10% causing 10% price deflation, I think that nobody would be complaining....everyone would be much, much wealthier...the deflation would later ease back as the supply of credit would reduce, reducing investments which might increase output...the system would balance back towards steady deflation. In other words, deflationary growth in wealth is self-regulatory and will provide a more steady model of growth in wealth.

Quite simply, I just do not believe that ongoing and steady deflation is a bad thing. If anything it is far better than ongoing inflation. Regular readers will know that I have advocated a system of money based upon a fixed specie of commodity (such as a gold standard). However, the more I have thought about this, the less I like the idea as the supply of gold also increases, such that the supply of money increases.

There is a better way, which is to absolutely fix the supply of money, such that it can never be expanded. Instead of inflating the money supply, as an economy expands, the units of currency at the start simply increase in value.

This does pose some practical difficulties, such as a unit of currency increasing in value so much that it becomes difficult to exchange for anything but ever larger items. To illustrate with an extreme example, if there were one thousand units of currency in the year 1066, then each unit of currency today hold nearly enough value to buy a city. The way around this is not to increase the units of currency, but to sub-divide the currency into smaller units. Just as today there are pounds and pence, as the value of a currency increases, it would need to be divided into pounds, pence and 'x'. At no time are any more pounds created, such that the pound is never watered down. Dividing a pound into pence does not devalue the pound, it is the increase in supply of pounds that devalues the pound.

There are many more points that could be made for such a fixed supply of currency (such as international implications), but this post has already gone way beyond my original intent. As such, I will leave it there, and leave you pondering on dinner table economics.

Note 1:

I am still getting more comments on my posts on fractional reserve banking. A brief answer to some of the comments. Yes, I agree that £1 GB is actually an IOU, and that banks also are creating IOUs. As such they are comparable. As you may have noted - throughout the blog I am casting doubts on whether the IOU that underpins the £GB and $US have any greater value as money than the IOUs of banks. In this sense, they are even more comparable than is widely believed.

However, my point about what is money always rests on a single principle, and I have explained this in several examples. Money is what people collectively believe it to be. I think I gave an example that illustrates this. A person who is starving to death will see a bowl of rice as more valuable than an ingot of gold, if he can not exchange the gold for rice. In a situation of starvation (where no food can be purchased from outside with the gold) rice would become a currency. People would exchange houses, land, or anything for the rice. It would become the currency that everybody believed in.

In the example in this post, even the value of the currency that I am proposing would be superseded by a food currency in the starvation situation.

When people were waiting in long lines outside of Northern Rock, they wanted to have their money denominated in £GB, not in bank IOUs. When they did this, they were clearly expressing their view of what money was, and that was not a bank IOU. It was a government IOU. Sadly, their belief in the government IOU is probably about to be tested as well....

The point in all of this is that when policy makers make policy, it seems a wise idea that, when they model the economic world, they have an understanding of money that conforms to the idea of money held by all of the economic actors - a reality which is expressed in the people waiting in line outside Northern Rock.

Note 2: At the dinner (on Saturday), I was explaining to a Chinese friend that her country was now the most powerful in the world, that power had shifted entirely towards China. As if on cue, Hilary Clinton is seen with the begging bowl out in China. Regular readers will know that I have been pointing to the reliance of the US on China for a long time.....

Note 3: Regular readers will also know that I have long been suggesting that the economic crisis has the potential to see the end of the Euro, and this is now the subject of speculation in the press..

Note 4:

A regular commentator 'Lord Sidcup' points out that mainstream commentators are starting to arrive at the same conclusions as my own (a couple of examples above). He asks where I can take the blog as they finally catch up.

It is a good point. I am wondering this myself, as my purpose was always to try to get a message 'out there' to as many people as possible. The blog has moved to the point where many readers (measured in many 1000s) now read each of my posts. As such I have a sense of obligation to offer something useful and that will only be the case if I can offer what I believe to be a better description of 'reality' than others. My philosophical foundation is critical scientific realism, which has helped me in this task so far.

However, if others offer the same analysis as the blog, then it might be time to call it a day. As such, I suspect that this blog may not have much life left in it. In particular, the scene is now set, and I very much doubt that anything will turn back the inevitable course of events. Whilst the exact timing of the denouement is still a matter of some uncertainty, the contradictions I have been discussing for so long must be resolved. A commentary on the detail of events will not offer anything that I have not already covered. Wealth will be still be wealth, and ongoing economic delusions that are the subject of this blog will remain delusions.

The populists, the something must be done politicians, will flail around for solutions, all the while doing more harm. The general populace will still think that everything might be 'fixed', without accepting the reality of what is actually broken. The fundamental problem is that the reality of the underlying problem is something that is hard to accept. This is the idea that we are no longer wealthy enough to live as we have before....unless we accept reform, and very tough reform.

At this stage, I am less and less sure of what I can add, and have had this thought occur to me several times recently. I will give this subject some thought. Comments welcomed.

P.S. Lord Sidcup, I am glad to hear that you read Marx and Adam Smith. Smith, is quite astonishing, and I have long suspected that one of the problems with economics is that all economists are comparing themselves to his ghost.

Note 5: I had a considerable amount of traffic on my posts on QE, and hope that many letters were sent to MPs. My thanks to those who took the trouble. I find it very disturbing that a significant (historic proportions?l) policy might take place under such conditions of opacity. Let's hope somebody pays attention.....

In earlier days you ran a few 'how to reform it' posts which were (as always) excellent.

If you feel that you've run out of steam on the Crisis side of the equation, there are lots more areas of reform where your clear and concise ideas would be interesting and valuable.

I suspect you'll find lots more opportunities for comment though, even on the Crisis side. Things will keep spiralling down and as they do new nonsense will need the CE treatment.

I read a great many blogs and forums. Of them all, this is the one I enjoy the most and find the most useful. I'm sure others, like me, await new posts eagerly. Not just for your insightful and intelligent comment, but also for the comments of the well-informed and free-thinking readers you attract.

So, in conclusion, I really hope you don't stop writing the blog. But if you feel you need to, maybe a 'discussion forum' with you as chief moderator would be a good way to go? That would keep the "community" you've built (which I value very much) alive, and you could view the comments and get 'inspiration' from them?

I'm sure you are entirely able to do such a thing yourself. But if you need and want any help I would be entirely willing to set up and host the board for you, with no obligation and entirely under your control. Genuine offer, should you need it.

In regards to this Dinner Table article... succinct and powerful as usual. Thank you. If you're ever in Cambridgeshire, UK, please drop in for dinner with my family. We'd welcome an interesting debate like that over a good meal! : )

It seems to me that the current raft of measures to combat the deflation spectre (including interest rate cuts and money printing) serve two purposes. The first is to redistribute wealth from the cash rich and asset poor to the asset rich and cash poor. The second case for inflation is to allow the central bank to reassert control over credit and spending decisions.

Of couse, neither reason for inflation is particularly good - the first one is socially unjust, and the second is almost as questionable (as you point out).

I assume you're not questioning whether debtors lose out in a low interest rate or deflationary environment?

I always think of deflation as negative interest rates. So that what actually happens in a deflationary environment is that the stranger comes into your house and adds some dessert to the bowl in your freezer. Of course you're happy with this, but in exactly the same way as inflation directs money towards central banks, deflation takes it from them and puts it into your pocket/freezer. This is the first reason why central banks don't like deflation.

Regardless, the evidence for deflation is not borne out by current accepted inflationary measures! CPI is not really moving as of the most recent inflation report and RPI is dominated by the precipitous falls in one asset class - housing.

Hence the redistribution of wealth - while the price of goods is rising, the central bank favours the interests of those owning deflating assets and owing a swelling debt burden. Why? That's not immediately obvious, but it is almost certainly heavily influenced by the politics of the day.

The second issue of control is the well known 'pushing on a string' paradox - the question of control. As much as some broadsheet article writers would like, central banks are not able to set negative interest rates. Negative interest rates are not possible because we live in a capitalist democracy. The government cannot force savers to keep deposits in banks, because faced with negative interest rates, people would simply put their money under their beds.

But they can do the next best thing - which until very recently (although interestingly not any longer) was dubbed "the nuclear option". It can decrease the value of ALL money. This is a simulation of negative interest rates, with the advantage for the central bank that it will, at some point, bring the economy back into an inflationary climate, and back under their control.

P.S. I first aired my belief that the government was going to use Northern Rock to channel printed money into the economy here a week or so ago, and I see that this seems to be exactly what is unfolding - the Telegraph comes very close to saying that is how the freshly printed notes are being used (see paragraphs 4 and 5), but they refrain from pointing out what is becoming very obvious.

This is market interventionism at its very worst - manipulating the price of an asset to meet very questionable ends. In hot contries, government manipulation of the economy to favour a particular group or asset class is usually called 'corruption'. We have yet to see if Brussels cries 'foul' on this - we can only hope!

Hi Cynicus,your wisdom is highly valued by me. So much so I've posted your last three blogs to :-Google

"Chris Martenson"

and

"Crash Course"

I strongly recommend that you search out this site and read what Chris has to say; I believe you are both modelled on very similar beliefs? At this time, there are in excess of 110,000 people hitting the site monthly and that figure is growing rapidly.I'm under the user name - "Vanityfox451" and do my best to direct people to both yours and Chris' sites out of principal. It would be a tragedy for you to stop this neccessary work at this time. I think you'll find there are many more people who will comment after me with the same feelings in mind.Whatever your decision become, thankyou for sharing your talent for searching out truth...

Very clear and coherent, can't think of a single thing here not to agree with. Surely though one of the points of specie is to tske control of the money supply away from bankers and politicians and fix it in the physical world of objects. How on earth can your tempting suggestion work, how could the authorities not be tempted to 'adjust' the fixed supply of money?

Very clear and coherent, can't think of a single thing here not to agree with. Surely though one of the points of specie is to tske control of the money supply away from bankers and politicians and fix it in the physical world of objects. How on earth can your tempting suggestion work, how could the authorities not be tempted to 'adjust' the fixed supply of money?

Please don't stop your blog. It helps me so much to understand what is going on. I"m Dutch living in Uganda and you're the only source which I understand and it realy helps me to get in contact with "the financial crisis". keep it up

Another finely thought-out and well-written article. I don't think you'll wrap up this blog because this in just the start of the great unravelling and I think you'll have much to say about the misinformation and bad decisions from governments and their economists. That is - of course - unless things get really bad and decivilisation brings cyberspace to it knees. Until then, thanks and keep up the good work ;)

The only problem with a fixed amount of money, is us. Read some history. We tried it lots of times with an expanding amount (gold) and we ended up with our gold reserves in China too many times.

If money is faith, then the core of the problems is our values. Try running a simulation of your little medieval gold coin town, with a set amount of coins. How long till this set amount ends up in farmers and smiths. You may say that this is right but the ones with power will starve to death. They don't produce anything of value.

Now think. How many of us don't produce something of real value. Those are the ones that are going to loose in the deflation scheme. Those are the ones that hate and fight deflation. Those are the ones that will try to keep the inflation model up. You don't like politics but this is a class thing.

In deed you make a wonderfully clear presentation. I hope you'll continue your blog as well.

Of course, "everybody" has heard "marginal-this" or "marginal-that" in economics, but it's become clear to me that precious few really understand what "marginal" means.

The underlying problem is that they (apparently includes economists) don't understand the mathematical equivalent of "marginal": d/dt or d/dp (where p is some parameter like demand, supply, transactions, etc., etc.) as in the derivative from Calculus nor the follow-on idea of the differential equation.

As an engineer, Macroeconomics (but even Microeconomics as well) were shear hell because they would always keep insisting on avoiding the obvious connection and make arguments about things the hard, un-rigorous, error-prone way with supply/demand charts.

It reminds me of how Leonardo Da Vinci had to design things solely from geometric ratios and mechanical analogy: neither he nor any contemporary used a single algebraic formula for anything they did. This was why they imagined steam engines, but could never actually build one that was useful - ratios and analogy failed to bridge the gap.

Yet that's how economics is still performed today - one hand tied behind the back with a blindfold on.

I sometimes wonder if people would be helped by a concise yet accurate explanation of a Calculus derivative. Things like the arguments for "inflation" evaporate into inanities as crazy as 2+2=5 when you understand these math ideas.

Fallacies of Composition is another case of basic economic phenomena that get mindlessly embraced yet are clear and predictable when you understand the universality of "marginal advantage".

When everyone is using the same tricks no one has an advantage from them anymore. E.g. Dell's AP/AR/Inventory tricks or setting up a "Financial Arm" to your manufactured product company for the "easy money". In fact these are so universal now that there's actually an advantage to not using them at all!

The short of the impact is that everything thing in economics is d/dt or d/dp and anything that is d/dt or d/dp is only about differences, and thus if you think something is a "static" quantity, you've already got it wrong - it's a dynamic, changing thing like the water flow of a river rather than the water level in a stagnant pond, and the cases when you have a stagnant pond, the water level only matters in so much as it can create a water flow to another stagnant pond!

Hi absolutely agree with the rest of our contributors - your blog is an important node within the agora of the internet - and your brand of cynicism and talent for expounding the truth makes you a kind of Socrates within this realm. High praise indeed, and I would happily set about justifying this high praise to anyone...

Some say (usually old men with beards and wrinkle riven faces) that a burden of responsibility comes with talent... but what greater satisfaction can there be than to apply that talent and serve out the purposes of your life?

OK, moving on...!

May I introduce the Elliott Wave Theory... (bear with me while I give some background)

I started trading shares back in 2001, and quickly developed an interest in analysis (wheras the city trader I shared a flat with at the time used to 'buy if its going up and sell if its going down'!). I eventually came to the conclusion that Fundamental data was more or less useless unless you were sleeping with the boss of a company, and that technical analysis offered the only way of guessing what might happen next.

On my journey through the seemingly enless woodland of theories on technical analysis, I stumbled upon the Elliott Wave Theory. It is based upon the Fibonacci sequence of numbers which is the sequence from which the Golden Ratio or Phi is born. I don't intend to explain the inner workings of this irrational number here - you can find plenty of stuff on the internet including a podcast from Melvyn Bragg's wonderful In Our Time broadcast here The most important thing to say about it now is that the Golden Ratio is inherant in all of life, down to the proportions of a molecule of DNA

So if the Golden Ratio runs through all of life, and economics is a subset of human activity, it may be possible to apply the Ratio to that subset of activity... Hence we have the Elliott Wave Theory derived directly from Fibonacci first principles...

I fell in love at first site - such a profound, beautiful and unknowable thing!... In theory, it is possible to apply the theory to movements of all shapes and sizes in any tradeable item. In practice it is not that simple, and although I learned to believe it is possible to predict what will happen using the theory, it is not possible to say with certainty exactly when and by how much... Now, I hear most people saying 'What use is it then?' and thereby hangs the beauty in my opinion - its a matter of interpretation.

In 2002 I interpreted the model of cycles contained within Elliott Wave Theory to mean that towards the end of this decade we would see the end of the Grand Supercycle, and hey presto...

I'll spare you the inferences I derive from the meaning of this in broader 'real' terms, as this is arguably for every man to decide for themselves, but I think the conclusions you draw will be similar to mine anyway.

i must say i very much enjoy reading your posts and am in agreement with almost everything you say, however i read a column about why QE will NOT result in inflation, i am very confused, can you please take a quick look and possibly respond

Wealth is based upon output, and the structure of the money supply has nothing to do with making wealth, but has something to do with the distribution of wealth.

My point is very clear; it is the increase in total output of labour that is the sole reason for the increase in wealth.

An increase in productivity output often cannot happen if your money supply is inadequate. In the real world, an increase in output (productivity increase) doesn’t just come about by people working harder (although it can). Productivity increases can have a lot to do with innovation, automation, new technologies, new management techniques and so on. (In Third World countries most of these inventions and technologies just need to be imported and adapted from the West.) Very often businesses require extra money to increase output by borrowing to finance capital outlays to increase productivity growth. But what if the money supply is not growing and banks are unable to lend enough to businesses who want to increase productivity?

Without a growing money supply, credit will be more difficult to obtain.

When businesses or industries need a loan to create more production facilities (greater output) or investments to create high productivity, they will be increasingly unable to get them because the money supply is not increasing adequately.

Productivity growth will be prevented in such a system. Businesses fail unnecessarily. Economic growth is choked off.

This was the essence of why the gold standard failed: putting your money supply at the mercy of something arbitrary like new gold discoveries makes no economic sense. From 1873 to 1896, the West experienced almost continuous deflation, because the money supply growth did not match demand for money arising from growth in the real economy.

The deflation that resulted had awful effects that you fail to mention. Debtors suffered. There was a loss of business confidence. Then there is the classic “deflation spiral” caused by deferring purchasing: “Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity - contributing to the deflationary spiral.”

http://en.wikipedia.org/wiki/Deflation_(economics)

If you really think deflation does not have an adverse effect on economic growth, take a look at the Great Depression of 1873-1896.

Let’s take England as an example. From 1873-1896, England did not just experience price deflation. It experienced 3 awful deflationary economic contractions (genuine downturns in the business cycle, with slumping production, unemployment etc)

These periods were ones of severe economic contraction (real depression):

1873-18791883-18861890-1894

These were years in which the economy had 13 years of economic depression, within a period of 23 years of price deflation caused by inadequate expansion in the money supply.An unbelievable 56% of the period of price deflation was marked by real economic contraction.

Are we really to believe that inadequate expansion of the money supply had nothing whatsoever to do with this?

I can’t help feeling that high-flown, simplified and theoretical models of economics are no substitute at all for careful study of the empirical reality of economic history.

Let's start with the case of consumers stopping consuming. In this case, we have a good example of deflation to illustrate that deflation does not stop people buying things that they want. The example is computers which, as every year has gone by, have become ever cheaper in relation to their performance and sophistication. We all know that if we wait until next year, we will get a much better computer for our money. This is real deflation, but during a period of real deflation, the sales of computers has expanded, and expanded, and expanded.

But we are not talking about a decline in prices in simply one good only. We are talking about general price deflation across the economy. The second has much greater and worse effects. Furthermore, the price deflation of computers (caused by one industry producing increasingly cheaper and better computers) does not effect the supply of money, since we live in a fiat money system.

Question: Will China and the USA together succeed in preventing the dollar nosediving, to their mutual benefit?

First comment: You say that "If an economy has a total output of 100 units, it does not matter what the number of money units there are in circulation, as this will have absolutely no bearing on the level of wealth in that economy. The economy could have one hundred units of money in circulation, a thousand units, or a million units. It will make not one jot of difference to the wealth of that economy." Obviously that is right, in terms of comparative statics. But I don't think it holds when you look at an actual change. As you say in one of your Notes "Money is what people collectively believe it to be". People are accustomed to viewing money as wealth, not just as a medium of exchange. When extra money is injected into an economy, it can help companies bring idle productive capacity into use i.e. it can lubricate an increase in wealth. It doesn't create wealth, but it makes it easier for wealth to be created. It's a placebo, and like a placebo it works whilst people believe it's real. (When they don't think it's real, as in Weimar or Zimbabwe, it has altogether different effects.) Conversely, when the supply of money shrinks, doesn't it get harder for businesses to keep going? Isn't it likely that capacity will be moth-balled or even lost? Any unnecessary loss of productive capacity would make it even harder for us ever to pay off our debts.

Second comment: I'm a bit suspicious of the fixed amount of money. Whilst there are mercantilist countries around (i.e. the foreseeable future), would not it lead to an ever-decreasing amount of money in circulation? Nations with a payments deficit would have to reduce consumption, but those with a surplus would not have to increase consumption. Net effect would surely be a tendency for production to fall, driven by lack of demand, unless costs of production fell fast enough to keep pace?

Commenting on today's post I find myself pondering on the nature of saving. The radical idea seems to me that my work today can be somehow captured and stored for later use in the form of tokens. It somehow seems absurd that future generations wouldn't just kick my stick away and rip up the tokens if I decided to spend them. Yet I can, today, flip a burger, 'invest' the money I receive for this completely ephemeral service and, in 50 years of compounding interest, exchange it for a house or a yacht. However, if I didn't 'invest' the token, but hid it under the mattress and then tried to spend it, it would be worth nothing - but the world would have been better off from my work anyway. Why must the token be placed in the bank for the value of my work (which had already been done) to increase in value? In what way did the placing of the token in the bank rather than under a mattress benefit the world?

The deflation that resulted had awful effects that you fail to mention. Debtors suffered. There was a loss of business confidence. Then there is the classic “deflation spiral” caused by deferring purchasing: “Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity - contributing to the deflationary spiral.”

Hmm. That's a bit of a distractionary argument. Let's be more specific - consumers have an incentive to delay luxury purchases in a deflationary environment. Can you really delay the purchase of bread or milk or eggs because you think the price might come down?

Of course debtors suffer in a deflationary environment, but isn't that the point? Creditors suffer in an inflationary environment!

The belief that depression of 1873 was brought about by a lack of gold is a principally monetarist interpretation of events. As the Wikipedia article rightly says these shortages were quickly alleviated by the gold rushes. No, a more plausible explanation I think you'll find is that it was another very familiar speculative bubble! The Autro-hungarian empire rapidly expanded mortgage lending through newly-formed lending institutions especially in Vienna, Paris and Berlin. According to one interpretation here:

"As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873. Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing)."

Sounds familiar?

So, Lord Keynes I think you've inadvertantly unmasked the culprit while trying to defend the culprit's actions! The article continues:

"The long-term effects of the Panic of 1873 were perverse. For the largest manufacturing companies in the United States — those with guaranteed contracts and the ability to make rebate deals with the railroads — the Panic years were golden. Andrew Carnegie, Cyrus McCormick, and John D. Rockefeller had enough capital reserves to finance their own continuing growth. For smaller industrial firms that relied on seasonal demand and outside capital, the situation was dire. As capital reserves dried up, so did their industries. Carnegie and Rockefeller bought out their competitors at fire-sale prices. The Gilded Age in the United States, as far as industrial concentration was concerned, had begun."

So actually, the deflationary environment was a huge boon to those with capital reserves (as you might expect). But those heavily leveraged, thinly capitalized overspending countries in Europe suffered.

Does your argument still stand? I don't think so. Deflation has its winners and losers just like inflation does.

When I studied economics one of the reasons given for wanting inflation was that, effectively, most workers would rather have a 2% pay rise with inflation at 3% than a 2% pay cut with deflation at 3%.

(I have abandoned many of the economic theories I was taught, but this seems to be one of the rare occasions that the way people actually behave is being considered, rather than what people ought to do according to idealised theory)

In a deflationary situation, the areas of the economy where productivity is not increasing would have to negotiate pay cuts or become progressively less competitive and go out of business.

It may not be insurmountable, but I suspect the government would also be keen to avoid negotiating an across-the-board pay cut for its civil servants in line with deflation. Widespread strikes would be likely with all the political fallout that accompanies it.

2. Investment (revisited)

To add to Lord Keynes' points, in a deflationary situation, banks require a higher real return to make it worth their while to lend.

Assume deflation of 2%. Banks need to pay some kind of interest to attract deposits (say 0.5%). To make a profit, they need to be lending at another 1%, say, above what they are paying on deposits. This means lending at 1.5%, a real return of 3.5%.

If there was inflation of 2%, banks can pay their depositors 2.5% (0.5% real return) and lend at 3.5% and the real return charged on their loans is only 1.5%.

The numbers are fairly arbitrary but I hope the principle is clear. A potentially profitable, wealth creating business would have to be able to produce a real return of 3.5% in the deflationary scenario to be viable, but only produce a real return of 1.5% in the inflationary environment to be viable.

As deflation approaches in the UK and the real cost of loans is increasing for various reasons, businesses become unviable, shrinking the economy, leading to further deflation and the cycle continues.

I also implore you to keep writing your blog since it gives me of like minded thinking hope that your logic will prevail and become recognised by mainstream economists and polititians. You are the Adam Smith of today's global economy, with articulate thought, and you should publish a book of your blogs together with actively marketing your writings and thoughts to mainstreem journalists and media. I wish to see you present your logic and theories on TV business shows similar to Peter Schiff, Jim Rogers, Ron Paul and others. Your strong blog following and claim not to be a qualified economist is reason enough to be taken seriously.

I would agree with you that it is probably too late to save us from current politically driven economic policies that will lead to hyper-inflation and complete economic/social collapse, however it is imperative that people realise the true reasons behind this global economic failure not being true capitalism, plus how any future system should work if things do not turn out to be as bad as we fear.

Your latest deflation and units of money article is spot on with my thinking, but more so your writings help reinforce and put substance to make me understand things clearer.

To Ben, you are neglecting the effect of fractional reserve banking. For example, if a depositor is being paid 2% for his 100 Cupcakes on deposit, the bank can lend out 1,000 Cupcakes at the rate they choose. If this is 3%, then they are making a total of 28% on the original deposit of "real" Cupcakes.

Interestingly enough, they could also lend out at just 1%, less than they are paying the depositor, and still make 8% on the original deposit.

But that scheme would presumably quickly collapse as customers would be borrowing at 1% and putting it back in the bank on deposit at 2%.

There are many economists trying to convince the public that deflation brings an unusually toxic mix of compounding negative effects - that it is somehow much more insidious than inflation.

I will demonstrate why this is not the case - one is simply a consequence of the other, and the flipside of the same coin. Inflation has negative externalities too - but many economists simply choose to ignore them. I'll demonstrate by analying your assumptions, Ben:

Assume deflation of 2%. Banks need to pay some kind of interest to attract deposits (say 0.5%). To make a profit, they need to be lending at another 1%, say, above what they are paying on deposits. This means lending at 1.5%, a real return of 3.5%.

There is a positive externality of deflation for the depositor which you've ignored - in a deflationary environment, the purchasing power of the deposit increases by 2%!. Now, let's see where that externality goes in an inflationary environment ...

If there was inflation of 2%, banks can pay their depositors 2.5% (0.5% real return) and lend at 3.5% and the real return charged on their loans is only 1.5%.

Aha. We see that the positive externality of 2% is transferred from the depositor to the lending intermediary. So in an inflationary environment, the profits accrue for the lending intermediary at the expense of the depositor.

Can you see it yet?

The numbers are fairly arbitrary but I hope the principle is clear. A potentially profitable, wealth creating business would have to be able to produce a real return of 3.5% in the deflationary scenario to be viable, but only produce a real return of 1.5% in the inflationary environment to be viable. (the bold here is my own)

And there is the point. Answer this question - Viable for who?

Now you might say that its no good if banks don't make money in a deflationary environment (and you'd have a lot of friends amongst government economists!) however the assumption is therefore that banks should not be exposed to cyclicality at all! They should be able to expand credit without repercussion and when credit contracts, lending intermediaries should also be immune.

This is just not realistic. We all have to live with consequences of our actions, and forgoe profits after periods of extraordinary profit-taking.

I still haven't heard any credible arguments for why deflation is inherently worse than inflation other than the winners and losers change places, and that depending on whose side you stand on, you might perceive this to be a bad thing.

I invite anyone to give a credible argument why deflation is inherently worse than inflation.

I agree that macro-economics/inflation/taxation do not create wealth, but merely redistribute it. However, redistribution can incentivise increased wealth creation (if done properly). Your two wine glasses were enough for a subsistence lifestyle. Working longer hours, or more efficiently, could produce a third or fourth wineglass to be exchanged for dessert or university fees. However, you might not always feel this extra effort to be worth your while, and hence produce only two wineglasses. (This is my core point - once your greatest needs and desires are satisfied, people's motivation to work harder often decreases.) A tax rate of 50% would require you to produce four wineglasses to maintain your subsistence lifestyle - any less and you will starve to death, which is a pretty good incentive to work harder. The state can then spend those taxes... hopefully on university fees and not white elephants or counterproductive wars etc. To conclude, macro-economics/inflation/taxation do not create wealth, but can incentivise (compel) its creation. (Please keep blogging. The time for predictions may be ending, but the time for explaining has not.)

Hi Cynicus, I've been reading your blog regularly for the last 6 months or so as an antidote to the mainstream news which mostly feels like propaganda. I normally only read the comments section rather than respond as I really don't quite grasp enough about economics to input much of value at this stage, but I'm learning more every post :-) I certainly hope you can manage to keep up the good work if you are able, or maybe point some of us in a good direction if you do decide to hang up the pen.

Great blog CE - a real nugget. Like all others this is a great post. However Im not sure that your use of the term defaltion is strictly correct. Surely inflation/deflation refer to general price movements directly linked to an overall change in the amount of money. This is bad. Price reduction on given products due to improvements in prductivity is not deflation - its wealth creation as you describe in your dinner table parable. This is a good thing. Perhaps Lord Keynes and yourself are talking at cross purposes.

Keep blogging - the establishment will never own up to the truth and will still be spinning\lieing frantically as unemployment tops 5 million.

Can Anonymous that talks about 2. Investment (revisited) put some figures into his argument, please?I know I'm probably dumb but I don't follow what he is saying.It sounds like you have to produce less to stay still with inflation and work harder to stay still with deflation. I don't get it.

Sorry to flog a dead horse, but I noticed, after reading your latest post, that this thread seems to be still active, and wanted to answer some questions posed to me by jonpaul.

I think one of the problems that people have with the concept "money as debt" is that they think of debt as an interest bearing, money loan. Now, while money loans are a form of debt, and in some cases may lead to the "creation" of money (as in the example you gave of personal IOUs), they are just a special, and not very interesting case. Since a money loan is in essence "second-order" debt, i.e. debt on debt (with interest thrown in), it is not a good vehicle for understanding the basic idea of "money", it just muddies the waters...

A debt is an obligation. If I promise to mow your lawn in return for fixing my computer, I have incurred a debt, which is outstanding until I actually get around to mowing your lawn. The debt has "value"; in this case the labour I have pledged to expend. I may default on this debt (by e.g. dying) or I may annul the debt by mowing your lawn. There is no interest and no cash or gold coins involved in any of this.

How does this relate to a more realistic scenario, and how does debt (in the sense of "obligation") become money?

Let's say Alice wants to buy a house and Bob who has just inherited one from his grandma, wants to sell it for 100k to buy himself a Ferrari (second hand). Unfortunately, Alice does not have 100k, but she has a job and is willing to give up half her earnings for the next 15 years to own the house. This is not good enough for Bob, because the Ferrari dealer will not exchange the car for Alice's 15-year labour. We have a deal-breaker.

Enter the banker. He says to Alice, in effect, "I will give you your 15-year half-earnings, up front, in return for your commitment to pay us half your income for the next 30 years". This is a good deal for Alice, since she needs a place to live, and the monthly costs are similar to what she would have to pay for rent (courtesy of the way the system has been set up in the UK). It is a good deal for the bank, since it secures a long term income stream, guaranteed by the physical asset of the house itself. So the mortgage is signed. But the banker does not go down to the vault to fetch a palette of 50 pound notes, put there by "depositors", to give to Bob. No. He says to Bob: "Here's an IOU for 100k. Spend it as you like and put it on our tab!".

Why would Bob accept such an arrangement? He doesn't have to. He can say "I want my palette of 50 pound notes", and in this (highly unusual case) the bank would be good for it, after all, 100k is small change to a bank. It **would** put him on terrorist watch lists (have you ever tried to rent a car or an apartment for cash?), and on arriving at his dealer's with a forklift-truck worth of notes, the latter would probably lock himself in a safe room to call the police. So of course he will accept the IOU. (I'm exaggerating with the fork lift truck - a suitcase would probably do)

So, let's recap. The 100k IOU has been created by the bank for Bob to spend in his Ferrari. Where did the money come from? Has the bank just "printed" it out of thin air? Not really. Alice has pledged her income to the bank, and her "debt" is guaranteed by the property that Bob sold to her plus the legal/enforcement framework of the state. The bank has taken its cut for all its trouble from Alice (an extra 15 years of debt peonage). In the long term, the bank is good for its IOU (it will extract enough "value" from Alice's labour to cover the cost of the house, and then some..) But the "current" increase in the money supply is due entirely to Alice's debt. Debt has become money.

To answer jonpaul's question - the 100k for the house was **not** taken out of the money paid in by the depositors, so the money has not just been "moved around". It was created when Alice signed the mortgage (mortgages are listed in the "asset" column in bank balance sheets). In fact, in theory, a bank does not need depositors to "create" money - it just needs borrowers (the depositors are just a distraction). Banks convert illiquid long-term debt into liquid short-term debt, and take their cut of the action. That is, if they are not too greedy...

This is, of course, a highly simplified model, but it captures the essence of what is (or should be) going on in an ideal world. Reality is more complex. The model does not explore what happens if the bank "securitizes" Alice's debt into collateral for bonds issued by an off-the-books SPE then sold on to a hedge fund, which leverages it up 20 times and then uses it to speculate on the the yen etc. etc. But that's a different story.

Finally, I'd like to join the chorus of your fans to encourage you to continue your very fine blog.

MattInShanghai, Effectively, banks can buy houses and put that as an asset, on their books, and this is offset by a credit to the seller. If they wanted they can buy every piece of property and give 'tabs' to the sellers. The only thing stopping them is that they might have a high demand for physical cash and not be able to meet this demand at once (a run on the bank). So the barrier to a bank buying all the property in the land is the amount of money put on deposit.Is that right? So a rule of thumb is to only lend out a percentage of what you have on deposit.

You are more than welcome to comment on the posts, but please try to stay on topic....I will publish all comments, excepting spam and bad language, and my moderation of the comments is just to exclude these.

Please allow up to two days for the comment to appear.

I have had a request for an email address for the site and have created the following:

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I have ommitted the @ symbol to avoid spam....

For general purposes I would suggest using the comment form, but will occasionally look at this email account. Please be clear what is for publication and what is not, though I will also not guarantee publishing of email comments, unlike the comments through the form! Thanks.

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